Woodbury latest firm to expand by adding bank brokers

Acquisition of Capital One's advisers represents growing trend among independent broker dealers

Apr 10, 2018 @ 5:00 pm

By Bruce Kelly

Yet another broker-dealer is taking a stab at working with bank brokers, as Woodbury Financial Services on Tuesday said it had acquired $10 billion in brokerage and advisory assets from Capital One Financial Corp.

The deal, terms of which were not disclosed, is sizable for Woodbury. It adds roughly 20% to the firm's overall amount of assets, which were $39 billion at the end of last year.

Moving to Woodbury from Capital One Investing are 51 registered reps who now work in bank branches, said Rick Fergesen, Woodbury's president and CEO.

"Today the advisers are employees of Capital One and reside in the bank branches, and now they have a pathway to becoming independent contractors and advisers," Mr. Fergesen said. "Many were thinking about that possibility in the future anyway."

Woodbury is one of four broker-dealers that comprise the Advisor Group network. The others are FSC Securities Corp., Royal Alliance Associates Inc. and SagePoint Financial.

This acquisition was the largest ever for Woodbury, Mr. Fergesen said.

The Capital One advisers will join Woodbury's roster of affiliated independent advisers and get access to the firm's technology, marketing services, business building support and wealth management solutions.

Unlike some of its competitors such as Securities America Inc. or INVEST Financial Corp., which was acquired last year by LPL Financial, Woodbury does not have a focus on bank brokers, noted Jonathan Henschen, an industry recruiter.

"Why would Woodbury buy a bank channel?" Mr. Henschen asked. "It's never been a strong suit for them, and I've never known them to have anything organized for the bank channel. But $10 billion is a nice chunk of assets."

Mr. Fergesen said that the 51 advisers who have agreed to work at Woodbury have a focus on financial planning, so they were a fit regardless of whether they worked in a bank.

"It's a neat opportunity," he said. "We viewed this group as a unique profile of advisers. In general, we are CFP- type people who are steeped in financial planning."

The advisers are located in three places, Mr. Fergesen said: Long Island and the general New York metropolitan area; the Mid Atlantic; and Louisiana and Texas.

With about 1,200 producing reps and advisers, Woodbury is not the only firm that has recently expanded into banks. Ameriprise Financial Inc. last year acquired Investment Professionals Inc., an independent broker-dealer based in San Antonio, Texas, that focuses on the market for independent reps working in banks and credit unions. It was the first foray into the bank market for Ameriprise.

Consolidation in the broker-dealer industry has been a steady trend since the credit crisis.

The number of IBDs has declined 28%, with 904 open for business in 2015, compared with 1,255 such firms that were up and running in 2005, according to a report last year from Fidelity.

And with increased regulation pressuring profits, broker-dealer operating margins dropped from 12% in 2006 to just 3% in 2016, according to Fidelity Clearing & Custody Solutions, the business division that completed the research for the report.

The sale is part of Capital One's move away from some financial service businesses. In January, the company announced it was exiting the online investing business, selling 1 million brokerage accounts to E*Trade Financial Corp. for $170 million.

Woodbury recruited 213 new advisers in 2017, representing a combined $5 billion in assets under advisement.

Advisor Group grew by 614 advisers and $13 billion last year.

Woodbury expects to complete the Capital One transition in the second quarter or early Q3 of 2018.


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